Crop insurance in action: Russ Mauch, Mooreton, N.D.
“If you’re not a risk taker with an incredibly optimistic view of life and a deep belief in your own potential as a businessman, then you better not think about wanting to become a farmer,” says Russ Mauch, past president of the American Sugarbeet Growers Association and a sugarbeet farmer.
Mauch is a second-generation farmer who grew up on a farm in Mooreton, North Dakota, with his five sisters and two brothers. He has fond memories of his early life on the farm, where, with his dad and two brothers they ran a fed cattle operation.
“Growing up on a family farm was a great experience that instilled a great deal of self confidence in me as well as a positive view of my potential,” he says.
1973, was a watershed year in his life as they switched their farm over to sugarbeets and joined the newly formed farmer cooperative. “That kicked us out of the livestock business and put us into the full time sugarbeet business,” he says with a smile. Mauch says that when you become a sugarbeet farmer, there just isn’t enough time in the day for a cattle operation on the side.
“Sugarbeets require a heck of a lot of extra time and effort and we just didn’t have enough time to devote to both,” he said. He explained that a sugarbeet operation is a year-round venture, which entails planting in the early spring, tending to the fields during the growing season, and harvesting just prior to the first hard freeze. After the beets are harvested, most of them are placed in huge piles and allowed to freeze solid for the duration of the winter.
If luck is on your side, the winter will remain cold and the beets will stay frozen. They are removed from the piles during the winter and shipped to the processing plants, where they are refined into sugar. By the time this process is over, it’s nearly spring and time to start plating again.
Asked about his view as a long time farmer now, and the lack of knowledge that most folks have about farming, Mauch answered that it’s no great mystery why the urban public has a complete lack of understanding of the life and challenges of a farmer. “It can be summed up in two words,” he said.
“Magnitude and risk.”
Mauch notes that when the urban public hears about soaring grain prices, or the amount of money an acre of farmland might be worth, or news reports about the gross revenue that a given farmer expects after a successful harvest, “they automatically think that, given the numbers they’re hearing, we’re all filthy rich,” he says. “But that’s very often far from the truth.”
That’s the issue of “magnitude.” “Most people are not accustomed to hearing about expenses and bills in the size that farmers see on a daily basis,” he said.
For example, Mauch explains that his fertilizer bill for this year was $800,000; his crop insurance coverage was close to $200,000 and his diesel fuel will be over $400,000 for the year. “Those are numbers that, frankly, are incomprehensible to many people,” he says.
“My wife calls it ‘funny money,’ since it just doesn’t seem real,” he says, noting that it seems more like “Monopoly money” than the real thing. “Who ever has to deal with utility bills like that?” he asked.
The other issue is risk.
“What the public does not understand is all of the risks we take that are out of our hands,” he said. These include wind, torrential rains and heavy flooding, tornadoes, insects, wildlife, interest rates, crop prices that are very volatile, corn getting moldy and sugarbeet piles that rot in the fields from a sudden warm-up. All of these, he explains, are out of a farmer’s control, but at least they’re local. Then there are the risks that are out of control and global, like trade, prices and interest rates.
“Most people face maybe one or two of these risks at their current jobs,” he says. “Farmers face all of them, year in and year out.” And that, says Mauch, is why “crop insurance up here for the farmers is essential to survive.”
Mauch explains that for his farm, for example, they had the worst years on record in in 2005, 2007, 2009, and 2011. “They were the worst farming years in my whole life in the business,” he explained. “But 2004, 2006, 2008 and 2010 were our best years,” he says. “It’s this spiking up and down, which we have no control over, which is why crop insurance is so important,” he says. “Try planning for something like that!”
He says that crop insurance shields the farmer from adversity; it protects the viability of the business to recover thus ensuring the nation’s food supply. “Crop insurance does protect the farmer, but what it really does is give the farmer the ability to repay loans and it also backs up the bankers loans for collateral,” he says. “And frankly, most of them require it now. “
Crop insurance has also been an important tool for farmers who are looking to take advantage of all of the various marketing possibilities out there, since it allows them to forward contract for their crops and ensures that if those crops fail, they have capital to pay off their contracts.
“One of the main reason crop insurance became important was that it would enable you to pay back your operating lines of credit since we all borrow so much money,” he said, and added that the difference between crop insurance then and now was like “night and day.”
“Most farmers now are taking it out because it’s not only working very well, the coverage is sufficient to save the farm if you have a bad year,” he added. Mauch also noted that today’s successful farmers have become much more adept businessmen and understand the importance of marketing their crops to hedge their risks. “The ability of farmers to buy to up 75 percent or more helps them forward contract,” he said.
“And with the revenue products, a farmer who has forward contracted a crop will know that his bases are covered even if his crops are wiped out and the prices of commodities he holds contracts for shoot through the roof,” he said. “The fact that the buy up increases with the crop prices allows you to keep your bases covered,” an option that allows many farmers to sleep at night.
Mauch says that while farming is a business, it is a unique undertaking, because of the scale and risk involved, as well as what is at stake in the long run, which is the security, availability and affordability of a healthy, wholesome food supply. These factors necessitate some degree of continued federal involvement in agriculture.
“The government’s main role is to provide a floor for farmers should a disaster occur, which it does each and every year, someplace in the U.S.,” he said.